2001 (11) TMI 213 - AT - Income Tax

Summary

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the IT Act.
2. Validity of the penalty quantum.
3. Applicability of Explanation 5 to Section 271(1)(c).
4. Voluntariness of the income disclosure.
5. Proper initiation of penalty proceedings.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the IT Act:
The primary issue is whether the assessee concealed income for the purpose of Section 271(1)(c). The judgment clarifies that concealment is judged with reference to the original return. The assessee did not file the return by the time of the search on 20th August 1987, and the original return filed on 14th September 1987 did not include the additional income disclosed during the search. The Tribunal concluded that the omission to disclose the additional income in the original return was deliberate and not due to a bona fide mistake, thereby justifying the imposition of the penalty.

2. Validity of the Penalty Quantum:
The Assessing Officer (AO) initially imposed a penalty of Rs. 50,000, which the Commissioner of Income Tax (Appeals) [CIT(A)] upheld but reduced to Rs. 33,052, equivalent to the tax sought to be evaded. The Tribunal confirmed the penalty quantum sustained by the CIT(A), as the additional income was declared based on seized material and not merely on the assessee's admission.

3. Applicability of Explanation 5 to Section 271(1)(c):
The assessee argued that Explanation 5 to Section 271(1)(c) was not applicable as no assets or valuables were found during the search. The Tribunal noted that when Explanation 5 is not applicable, the conditions for its exclusion are redundant. Therefore, the assessee's contention that the income offered for taxation was not liable to tax was rejected, and the penalty imposition was upheld.

4. Voluntariness of the Income Disclosure:
The assessee claimed that the disclosure was voluntary and made to buy peace. However, the Tribunal found that the return filed on 14th September 1987 was not within the time allowed under Section 139(1), and the revised return was not voluntary as it was filed after being confronted with the seized material. The Tribunal concluded that the declaration was not voluntary and was contrary to the evidence on record.

5. Proper Initiation of Penalty Proceedings:
The Tribunal addressed whether there was proper initiation of penalty proceedings. It referred to the Supreme Court's decision in CIT vs. Angidi Chettiar and D.M. Manasvi vs. CIT, emphasizing that the AO must record satisfaction regarding concealment of income during the assessment proceedings. The Tribunal remitted the matter to the CIT(A) to determine if the AO recorded the necessary satisfaction. If no satisfaction was recorded, the penalty would be invalid; if satisfaction was recorded, the penalty would be confirmed.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes, directing the CIT(A) to verify if the AO recorded the satisfaction regarding concealment of income during the assessment proceedings.